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Introduction <\/strong><\/p>\n With the recent bankruptcy filing<\/a> of nationwide grain dealer Hansen-Mueller, producers may be left without compensation for grain sold to the company. In these situations, producers should consider what options may be available to recover compensation for losses due to insolvency of a grain dealer or warehouse. In several states, those producers may be able to turn to their state\u2019s grain indemnity fund. State grain indemnity funds are typically created to aid producers who have sold grain to a grain dealer or warehouse which later becomes unable to fulfill its obligations. The distribution of these funds is often regulated by statute and varies from state to state. This article will highlight requirements commonly seen across state grain indemnity funds. While understanding these common requirements is crucial to understanding how grain indemnity funds function, it is important to keep in mind that requirements will vary between states.\u00a0 A breakdown of state-specific requirements is available here<\/a> in NALC\u2019s state compilation \u201cRegulation & Requirements for Grain Dealers.\u201d<\/p>\n Background & Funding<\/strong><\/p>\n Currently, 15 states have a statutory grain indemnity fund. Grain indemnity funds operate as a sort of insurance for state agricultural producers. In the event a qualified grain dealer or warehouse becomes unable to pay producers for delivered grain, a state grain indemnity fund can step in to compensate producers. To build up the \u201cinsurance\u201d fund, grain indemnity programs generally rely on fees or assessments collected from grain sales. For example, Idaho producers are required to pay a 0.2% assessment on the total gross dollar amount of all commodity sales. ID Code \u00a7 69-256<\/a>. In Kentucky, producers are assessed at a rate of .0025 times the gross-value of grain covered by the fund. KY Rev. Stat. \u00a7 251.640 (2024)<\/a>.<\/p>\n Often, the size of the funds are capped by specific statutory standards. For example, Indiana requires that the fund be maintained at or exceed $20,000,000. As a result, the assessment on producers in Indiana will only be effective when the fund is below $20,000,000.\u00a0 Once it reaches that level, the assessment will not be collected until it again sinks below the threshold. Ind. Code \u00a7 26-4-4-9<\/a>. Similarly, South Carolina only applies assessments when its fund is below $3,000,000. SC Code \u00a7 46-40-90<\/a>.<\/p>\n Understanding how these programs are funded is important, but in an emergency situation producers are likely far more concerned with how to actually recover their losses. When seeking compensation under a grain indemnity program, producers should consider whether they qualify, how to apply, and how much coverage is available.<\/p>\n Qualifying Producers <\/strong><\/p>\n Occasionally, grain indemnity funds will have certain prerequisites for a producer to qualify for assistance. The qualifications necessary to benefit from a grain indemnity program vary from state to state. Louisiana limits recovery under its fund to \u201cany producer who sold agricultural commodities to the licensee\u201d while defining \u201cproducer\u201d as \u201cthe owner, tenant, lessee, or operator of land within this state who has an interest in or receives all or any part of the proceeds from the sale of agricultural commodities produced thereon.\u201d LA Rev. Stat. \u00a7 3:3402<\/a>. Idaho\u2019s grain indemnity fund requires every producer to pay an assessment for deposit into the commodity indemnity fund to qualify for coverage. ID Code \u00a7 69-257<\/a>. While producer-specific prerequisites are less common than dealer requirements, they are important because they can impact an individual\u2019s coverage under grain indemnity funds.<\/p>\n \u00a0<\/strong>Qualifying Dealers<\/strong><\/p>\n Qualifying producers should then consider the other party to the contract- the dealer or warehouse where they delivered their grain. Frequently, losses by qualifying producers are only eligible for coverage if the grain dealer or warehouse is licensed by the state.\u00a0\u00a0 For example, Louisiana permits grain indemnity payments only when a \u201clicensed grain dealer becomes insolvent\u201d or a \u201clicensed cotton merchant becomes insolvent.\u201d LA Rev. Stat. \u00a7 3:3412.1<\/a>.\u00a0 Similarly, many grain indemnity funds will only cover licensed grain dealers and storage warehouses. As an example, statutory language in Idaho\u2019s fund explicitly states that \u201cthe director shall not approve or pay any claim made on the commodity indemnity fund if the claim is based on losses resulting from the deposit, sale or storage of commodities in an unlicensed warehouse or dealer.\u201d ID Code \u00a7 69-262<\/a>.<\/p>\n Even in situations where a grain dealer or warehouse is licensed, some states impose additional requirements before a producer may recover for losses.\u00a0 For example, some funds require a formal bankruptcy filing by the grain dealer before the grain indemnity fund will take effect. South Carolina, in its grain indemnity statute, defines debtor as \u201cthe Southern Soya Corporation now in bankruptcy\u201d and \u201cany grain dealer who has filed a petition for bankruptcy or who has committed embezzlement or fraud.\u201d SC Code \u00a7 46-40-90<\/a>.<\/p>\n There are other actions that producers can do to limit their risk of nonpayment when engaging in the sale of grain.\u00a0 For example, it is important to know whether your grain dealer or warehouse is licensed.\u00a0 Often, the license process is done through the state department of agriculture- a list should be available online or by calling the agency.\u00a0 Along the same lines, confirm that assessments have been made on your behalf, if required, to ensure producer eligibility for the fund.<\/p>\n Timing<\/strong><\/p>\n The next question is how (and when) to apply for funding.\u00a0 The process varies between the states, but timing is a factor that is important across the country. Often, grain indemnity funds will create a \u201cwindow\u201d in which applicants can successfully petition for funds. That window of time can vary drastically between states.\u00a0 For example, after a producer in Idaho receives notice that a grain dealer cannot pay its outstanding contracts, they only have 90 days to file a verified claim for indemnification, after which \u201cno such claim shall be paid from the commodity indemnity fund.\u201d ID Code \u00a7 69-263<\/a>. Iowa, like Idaho, has a specific \u00a0time limit for recovering under its grain indemnity fund. In Iowa, \u201ca claim must be filed with a claim period beginning on either incurrence date and ending one hundred twenty days after that incurrence date.\u201d IA Code \u00a7 203D.6 (2024)<\/a>. The \u201cincurrence date\u201d can arise from one of two situations.\u00a0 Either the \u201ccessation of the license of the grain dealer . . . or warehouse operator\u201d or \u201cthe filing of a petition in bankruptcy by a licensed grain dealer or licensed warehouse operator.\u201d Id. <\/em>Minnesota, while still imposing a time limit on recovery, is much more accommodating on the deadline.\u00a0 It allows claims to be made up to 36 months after the failure of the grain dealer. Minn. Stat. \u00a7\u00a7 223.24 to .26<\/a>.<\/p>\n The claims process is typically more than just filling out a form, which makes the deadline for a completed claim even more important to consider. Many states require that \u00a0producers applying for relief under a grain indemnity fund present evidence justifying their claim. For example, claims in Idaho require \u201cwritten evidence disclosing a storage obligation or a sale or delivery of commodities.\u201d ID Code \u00a7 69-262<\/a>. Iowa requires \u201cadequate documentation to establish the existence of a claim and to determine the amount of the loss.\u201d IA Code \u00a7 203D.6 (2024)<\/a>. Similarly, to verify a claim in South Carolina, the applicant must \u201cpresent any evidence of loss including, but not limited to, scale tickets.\u201d SC Code \u00a746-40-40<\/a>. Some form of written evidence is a common requirement across the various grain indemnity fund statutes, so it is important to account for the time to locate appropriate documentation in the timeline calculation.<\/p>\n As discussed above, it is important to keep program requirements in mind when applying for these types of funds- reaching out to the state agency in charge of the program can be a helpful tool to identify state specific elements. If a producer is given a check that is unable to be cashed, or payment is not made in a timely manner or any other indication is given of a potential failure to pay, they should act quickly to preserve a potential recovery under a grain indemnity fund. Further, if a producer receives paperwork indicating that a dealer or warehouse has filed for bankruptcy (even if the payment is not yet due), they should begin identifying their options for the path forward.\u00a0 Finally, it is important to keep records and receipts of all grain transactions. In a worst case scenario, this will help to satisfy the common evidence requirement and assist producers in proving the validity of their claim.<\/p>\n Recovery <\/strong><\/p>\n Finally, it is important to recognize the limits of your state grain indemnity fund\u2019s coverage. For example, Tennessee limits recovery under the fund to 85% of a valid claim, or a maximum of $100,000. TN Code \u00a7 43-32-210<\/a>. Ohio, conversely, will pay up to 100% of the depositor\u2019s loss- but only in certain situations. Under Ohio\u2019s grain indemnity fund, depositors can recover the full amount of their loss when the grain was stored under a bailment agreement, payment was tendered and subsequently dishonored, and in other time-specific situations where the dealer\u2019s license was suspended. Ohio Rev. Code Ann. \u00a7 926.18<\/a>. For all other situations, Ohio reduces the coverage to 75%. Minnesota is another example of a state where coverage varies depending on the transaction. Under Minnesota law, producers can be protected for the full value of the grain sold on a cash sale less than 180 days from the deposit. However, the recoverable amount is reduced in situations where the transaction was a deferred or delayed payment contract or a voluntary extension of credit contract. Minn. Stat. \u00a7 223.24<\/a>.<\/p>\n In order to minimize risk, it is important to be aware of any actions that may limit your recovery.\u00a0 For example, consider the type of contract and the length of the pay period when entering into transactions with grain dealers. Recognize that extending the pay period may ultimately have consequences on potential recovery.\u00a0 Again, the state agency responsible for the program should be able to provide producers with state-specific factors and further information.<\/p>\n